Why Holding That Old Annuity Could Be Costing You
Most people understand the logic of refinancing a mortgage in a low-interest rate environment. Similarly, savvy investors know that different economic conditions—whether expansionary or recessionary—favor different asset classes and strategies. However, one area often overlooked is how higher interest rates can significantly enhance the value of annuity contracts, especially for those seeking guaranteed retirement income.
In today’s environment of elevated interest rates, annuity contracts are offering significantly better guaranteed income payouts than in years past. This shift has created what many in the industry refer to as a “gold rush” for annuity buyers—especially those who are reviewing older contracts issued during much lower interest rate periods.
Higher Rates = Higher Payouts
Annuities offer a combination of growth (either fixed or market-linked) and lifetime income guarantees. One of the most important features in these contracts is the income payout rate—the percentage used to convert your annuity value into a guaranteed income stream for life. This factor increases when interest rates are higher, resulting in better income opportunities for buyers or those considering exchanging an older contract.
Let’s look at two real-life examples that highlight the value of reviewing older annuity contracts in light of today’s opportunities:
Reviewing Old Contracts Is Essential
Not all annuities are created equal. Older contracts—especially those issued during low-rate environments—often carry lower income payout rates. Whether you hold:
A fixed annuity with a guaranteed growth rate,
A fixed indexed annuity with market-linked upside (and 0% floor), or
A variable annuity fully exposed to market performance,
…it is essential to compare what’s available today. Many current contracts are offering superior payout rates and features, especially for income-focused investors.
Final Thoughts
Higher interest rates have created a rare window of opportunity in the annuity space. For retirees or near-retirees looking to maximize guaranteed lifetime income, this environment could offer significantly better contract terms than those available even a few years ago.
Key Takeaway: If you own an annuity—or are considering one—review your contract now. You may be sitting on an opportunity to significantly increase your guaranteed income for life.
